This section provides an analysis of the Mexico's socio-cultural factors, such as age distribution and demographics as well as the recent technological trends, which will include the recent changes in mobile and information technologies. In conclusion, recommendations of the most appropriate strategies, such as the global logistics strategies necessary for Aldi to successfully expand into Mexico successfully will be provided.
Socio-Cultural Factors in Mexico’s Retail Industry
In a PESTLE analysis, the sociocultural dimension of an industry is comprised of values, lifestyles and customs, which characterize the society in which a company operates. In any market, socio-cultural components of the environment have a significant influence on a firm's ability to function within the society, obtain resources, and make its goods and services. In their article, Cavusgil, et al. (2014) stated that sociocultural factors include anything that is within a society and has potential to negatively or positive effect an organization. Sociocultural factors in the Mexican retail industry has significant potential to affect Aldi's operations. Major sociocultural factors to be discussed in this section include norms and values, rising educational standards, population demographics, and customer attitudes towards social responsibility.
Norms and values. While norms are regarded to be the accepted standard forms of conduct, values are the attitudes toward wrong and right. Norms and values differ between geographical location and time. Lifestyles also vary among the different ethnic groups. For instance, American companies have influenced Mexican companies on the different approaches of management prompting Mexican companies to reevaluate their concepts of quality (Anandan, 2016). Besides, Mexican consumers have increasingly shown interest in product quality. The recent changes in customer’ attitudes have forced companies wishing to expand their business practices into the country to reevaluate their marketing and production strategies in response to the increasing consumer expectation.
Rising educational levels.
The rising educational standards have had a significant effect on companies in the Mexican retail sector. This improved levels of education in Mexico have given people the opportunity to earn higher income that would not have been possible. Increased income in Mexico has given consumers the opportunity to purchase additional services and goods, thus raising the overall standards of a larger segment of the population (Hudzik, 2014). Improved levels of education have also led to increased expectation among Mexican workers, hence increasing job mobility. On this view, there is the need to note that Mexican workers will expect desirable working conditions, characterized by stable employment as well as training and development opportunities. However, remittance has become one of the most significant income for Mexicans. Immigrants working in the US send money to their families. As shown in Fig 1., Central Bank estimates that remittance totaled to more than 23 billion USD in 2011. Educated Mexicans live in the US and send deposits to their families back in the US.
Population changes
The recent changes in population demographics in Mexico have led to significant potential consequences for foreign companies. The demand for product and services changes, the overall population also changes. For instance, the improved provision of health care and decline of birth rate in Mexico have led to the increase of the average age population. As the middle age population continues to grow, companies that traditionally marketed products towards the younger generations have increasingly developed product lines, which appeal to the elderly market. Foreign retail companies are increasingly capitalizing on the aging population since it is a growing segment.
Social responsibility
Grunig and Kuhn (2015) defined social responsibility as the expectation that businesses or individual strive enhance societal welfare. From a business perspective, CSR translates into a member of the public expectation of companies to take active steps that are aimed at improving the society by virtue of being in existence (Anandan, 2016). In the Mexican retail industries, socially responsible behaviors have continued to change over time. In the early twenty-first century, the most prominent social issues were human rights and environmental quality. Today, social responsibility in Mexico has moved beyond human rights and environmental quality to increased demand for a corporation to serve their communities.
Technological Trends in Mexico’s Retail Industry
Trends in technology are among the most significant environmental aspects that a company should put into consideration when developing strategic plans of expanding in foreign countries. The increasingly changing technology may have a significant effect on demand for company’s services and products, raw material as well as the production processes. Waters and Rinsler (2014) argued that technological advancements may create new opportunities for corporations, or may be a threat to the survival of the industry, product or a company.
Production Processes
In Mexico, technology has continued to change production processes. As stated by Forsgren (2015), the introduction of new products in the marketplace have called for the advancement of production techniques. New production technologies may modify processes of production. In the Mexican retail sector, robotics is a representation on one of the most significant challenges that exist in methods of production and are used in areas that are considered too hazardous for humans. The increased of use robotics has made the consequences of jobs that are occupied by human to remain unclear. The automation of production has displaced workers the existing employees and created new ones to maintenance and production experts (Anandan, 2016). In essence, the increased use of robotics in early 2000 has resulted in increased job loss he uses of robotics. On the other hand, technological advancements have led to increased innovation. From aerospace and automotive to the medical device market, Mexican manufacturing market has increasingly become a hotbed for the foreign direct investments (Anandan, 2016). It is no coincidence that the automation market has also fired up as companies increasingly adopted automation approaches. In 2015, Mexico recorded the highest record of robot sales (6,320 units worth 243 million USD) when compared to the previous years (Grunig & Kuhn, 2015).
Demand
Technological advancements have had a significant effect on the consumer buying patterns as well as the change of lifestyle. The recent advancements in field microcomputers in Mexico have continued to expand the potential customer base and helped companies to engage in their businesses over the internet. Where computers were traditionally used by large corporations to process data, new developments have led to reduced prices for computers, thus expanding the market (Grunig & Kuhn, 2015). Increased access to smartphones have made it easy for consumers to directly interact with the manufacture. As demand for the technology-based devices continue to increase, companies are increasingly using the internet to market products over the web. Besides, technological advancement has coursed some products to be removed from the Mexican market. In addition, chemicals used by farmers to control pests have been prohibited from use in the Mexican market.
Recommendation and Conclusion
Despite the decline of the Mexican retail industry after the 2008-2009 recession, the sector managed to bounce back, showing significant growth as of 2012. In Mexico, Department stores and supermarkets have continued to offer exporters across the globe with the best point-of-sale. Although the traditional retail stores still maintain the largest market segment in Mexico, most of them have not been considered to be viable for imported products. In essence, the traditional Mexican stores do not have the potential of selling imported products. Key recommendation for Aldi’s successful expansion into the Mexican market include viewing the optimization of global logistics as a strategic weapon and integrating both imports and exports with other business applications, as well as investing in research and development.
Viewing the Optimization of Global Logistics as a Strategic Weapon and Integrating Both Imports and Exports with Other Business Applications: Historically, logistics have been considered to be a cost center. In the increasingly competitive business environment, Aldi should place significant emphasis on consumer satisfaction. As the company enters into the Mexican market, there is the need to ensure that it maintains service quality by delivering the right products, at the right time to the right people. As a global logistic strategy, the integration of exports and imports with other business applications will be effective in the success of Aldi into the Mexican market (Grunig & Kuhn, 2015). For the longest time, both the inbound and outbound logistics have been treated separately. Since each operation presents unique requirements and challenges, separating them is a catalyst of eliminating collaborative opportunities.
Investing in Research and Development: The recent advancements in technology pose a challenge for companies wishing to expand their business practices in foreign countries to invest their time and financial resources in research and development: In Mexico, technological advancement presents potential opportunities and threats for the already established retail stores such as Aldi. Companies that have new and sophisticated technologies are introduced whereas the existing technologies refined, which makes it hard for firms to access potential markets (Grunig & Kuhn, 2015). For instance, manufactures of fountain pen believed that the introduction of new technologies was not a threat to the existing technologies until their market share got lost. With respect to this view, there is the need for companies that wish to expand their business practices into foreign countries such as Mexico to understand the complexity that exist in predicting the impact new technologies. There is the need for Aldi to give attention to research and development in industries which are not direct competitors because technological advancements in one sector may have a significant effect on organizations in other industry.
References
Anandan, T. (2016). Mexico, Land of Automatización Opportunity. Robotics Online. Retrieved 30 May 2016, from http://www.robotics.org/content-detail.cfm/Industrial-Robotics-Industry-Insights/Mexico-Land-of-Automatizaci-n-Opportunity/content_id/6041
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
Forsgren, M. (2015). Managing the Internationalization Process (Routledge Revivals): The Swedish Case. Routledge.
Grünig, R., & Kühn, R. (2015). Global Environmental Analysis. In The Strategy Planning Process (pp. 89-96). Springer Berlin Heidelberg.
Grünig, R., & Kühn, R. (2015). Strategy Planning Process. In The Strategy Planning Process (pp. 41-52). Springer Berlin Heidelberg.
Hudzik, J. K. (2014). Comprehensive internationalization. Taylor & Francis.
Waters, D., & Rinsler, S. (2014). Global logistics: New directions in supply chain management. Kogan Page Publishers.
